Alumni Capital Kicks Things Off With Minority Deal

Target: Personal Communications Division of UTStarcom Inc.

Price: $240 million

Sponsor: Alumni Capital Network: AIG Investments

Seller: UTStarcom Inc.

Financial Adviser: Seller: Merrill Lynch & Co. Inc.

Legal Adviser: Seller: Wilson, Sonsini, Goodrich & Rosati; Potter Anderson & Corroon

Alumni Capital Network, a New York-based lower-mid-market investment firm, has sealed its first investment since forming in 2006. Its minority investment alongside lead sponsor AIG Investments suggests that the firm has loosened its strategy a bit. Consider that Managing Director Jeff Miller told Buyouts in May 2007 that in order to join a transaction “co-investors would need to understand that we need to drive the deals.”

However, CEO Jim Honohan, a 28-year veteran of consulting firm Accenture, said the firm has not changed its strategy. And despite its minority status in its first deal, Alumni Capital is not a passive investor, said Honohan. “We liked the deal, the price, the structure and have some real value-add,” he wrote in an e-mail to Buyouts. “We have several other opportunities in the pipeline but this is a tough transaction environment, and this opportunity would have been hard to pass up for our investors.”

The firm, started by former partners at Accenture made an undisclosed minority investment alongside AIG Investments in the $240 million acquisition of the Personal Communications Division of UTStarcom Inc., an Alameda, Calif.-based communications equipment maker. The Personal Communications Division, based in Hauppauge, N.Y., makes handsets, pocket-sized personal computers and other personal communications equipment.

The 18-member Alumni Capital Network team has raised $62 million to date for its debut fund. Backers include wealthy investors—many of them related in one way or another to Accenture—as well as an undisclosed hedge fund and Triton Value Partners, an Atlanta-based advisory shop. Triton Value Partners in February made an investment in Alumni Capital’s fund as part of a partnership to find deals in the Southeast.

The firm seeks to make equity investments of $5 million to $25 million in areas such as telecommunications, consumer products and services, financial services and heavy manufacturing. It plans to invite its limited partners to co-invest with them.

Executives at Alumni Capital said they looked at some 125 deals but proceeded with extreme caution given market conditions, looking only for investments where they were sure their partners had ample expertise. “We’ve been prudent, careful investors,” Tom Donahue, the firm’s managing director of finance, told Buyouts. “Closing an investment in the last half of 2007 wouldn’t have necessarily showed investment prowess.”

The firm expects to conclude five or six deals with its debut fund, about two or three of which will be co-investments with larger firms, Honohan said. Following a few exits in this fund, Alumni Capital may seek to raise a larger fund, likely in the $250 million range. Alternatively, the firm may create smaller funds targeting specific sectors, Honohan said.